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Last Updated: Wednesday, 18 April 2007, 07:33 GMT 08:33 UK
The economics of ticket touting
By Caroline Briggs
BBC News entertainment reporter

Ticket touts are a growing problem for music fans desperate to get their hands on a ticket to see their favourite band. Princeton University's Professor Alan Krueger explains the economics behind buying and selling tickets on the secondary market.

If you go to a concert by The Police, U2 or Madonna, there is about a one in four chance you purchased your prized ticket from a tout.

It is a figure Professor Alan Krueger - described as "the world's first and foremost professor of rockonomics" - says many people find surprising.

Professor Alan Krueger
Professor Krueger thinks tickets are too cheap on the primary market
In a random sample of 28 gigs in the US last summer, he found 10% of tickets were re-sold - rising to one-in-four at "superstar" concerts.

"What we found was that 10% of people bought their tickets in the secondary market, which is lower than many people expect, but many of these concerts did not sell out," Professor Krueger says.

"If you look at concerts that sold out, it's higher - closer to 15%. And if you look at those with really high demand, it is more like 25%."

Falling CD sales

Professor Krueger believes the fall in CD sales over the last few years is partly behind the recent rise in concert ticket prices.

From 1996 to 2003, ticket prices rose by 8.9% a year in the US, with similarly sharp increases in the UK, he says.

I think that the main reason there are ticket touts is because the prices are not set properly to begin with
Professor Alan Krueger
"Beginning in 1996, ticket prices took off. I think the main reason was that the artists were not making the income they had previously made from record sales," he explains.

"In the old days, I think they kept the concert prices lower than they needed to in order to gain popularity and help record sales.

"Now I think they are setting concert prices to try and make the most money they can, irrespective of record sales."

In fact, it was David Bowie who in 2002 told his fellow artists to prepare to charge fans more to go to concerts.

''Music itself is going to become like running water or electricity,'' Professor Krueger says.

"I think what he had in mind was the first explanation that it is going to be really hard to make money from record sales and that you should charge what you can for the concerts."

Stones 'doing it right'

But the key to beating ticket touts is to set concert tickets prices even higher, he believes.

"I think that the main reason there are ticket touts is because the prices are not set properly to begin with.

Bruce Springsteen
Bruce Springsteen has been a popular target for ticket touts
"The Rolling Stones have pushed their prices up higher - I'd like to point out that Mick Jagger went to the London School of Economics - and I think they price as close to the market as anyone.

"I think they probably still have room to raise their prices, but I think they are doing it most right."

And because the best seats reach the best prices on the secondary market, he says it is up to artists and promoters to price accordingly.

"The reason why people are going to the secondary market is that they want to get a better seat than what's available and I think that is an indication that they were not priced properly in the first place," he says.

"In the secondary market, the tickets average 50% more than their list prices, and some go for a lot more than that. The very best seats go for double or triple the list prices.

"I think artists are still underpricing the very best seats, but I think it is slowly changing."

Good value

But Professor Krueger admits artists are reluctant to raise prices further.

"Bruce Springsteen charged $75 (37.70) for each ticket, while the secondary market was $300 (150) a ticket. He gave away more money that he actually raised," he explains.

"But I think from the artists' perspective, they view putting on a concert a little like throwing a party. And if you throw a party, you don't want to charge your guests too much.

"The artists feel like they are rewarding their loyal fans by giving them good value.

"I think that's breaking down in part because the artists are looking at the web with their managers and saying: 'Why should the middle-man get all this money? Why don't we charge more?'"

But Professor Krueger says the increase in prices is not all bad news for music fans.

"I think the nature of concerts is changing. Look at all the light shows and pyrotechnics at a U2 concert.

"Not across the board - a Bruce Springsteen concert is still pretty similar to what is was 20 years ago. But I do think the industry in evolving into what the audience expects."

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